Ford to Take $1B Charge to Buy Back Expensive Debt

Ford Motor Company is proceeding with a cash tender offer to repurchase up to $5 billion of the company’s higher-cost debt. In a move that will restore the now suspended dividend to shareholders, including the Ford Family, John Lawler, Ford’s CFO, said this is consistent with Ford’s objectives “to further strengthen its balance sheet and financial flexibility and return its credit ratings to investment grade.”

Last April, Ford sold $8 billion of bonds as the coronavirus pandemic closed Ford’s factories with a corresponding drop in sales. Actions such as the debt tender offer and the issuance of 0% convertible notes earlier this year, together with a “bet on the come line” of awaited broader access to capital from a “sustainable financing framework,” combine with Ford’s objectives to further strengthen its balance sheet and financial flexibility and return its credit ratings to investment grade. (Ford Motor Posts -$2 Billion Q1 Loss; Ford Posts Q1 Income of $3.3B. Semiconductors Still Difficult; Ford Motor Posts Q2 Revenue $26.8B, Net Income $56M, Earnings $1.1B as Market Share Drops; Ford Motor Earns $3.0 Billion in Q3)

“Winning businesses are financially healthy and lead in sustainability – it’s not a choice, they rely on each other,” said Lawler. Ford wants to become carbon become carbon neutral “no later than 2050.” Critics of such tepid actions note that it will take, oh, ~35,000 years for the next ice age to appear; if the planet survives that long. The UN claims the world needs to cut current emissions by half by 2030. (UN on Global Warming: Rapid, Far-Reaching Unprecedented Changes in All Aspects of Society Needed; GM Doubles Down on EVs in Bid to Win Global Race; EU Gets Tougher on Climate Change – Wants All EVs by 2035)

Another major immediate problem Ford and other automakers are facing is how to transition to an EV dominate company now that extreme weather changes from global warming is clearly prompting governments, automakers and consumers to prepare for electromobility.

This is a potentially ruinously costly survival requirement made worse by a dysfunctional US governments lead by obstructionist Republicans – with generous contributions from the coal and oil industries – who refuse to make the necessary investments to smooth the transition and prepare for the future in a way that creates jobs in clean energy technologies. (EVs, Coal Plant Closings Can Cut Carbon Emissions 42%; Volvo to Only Sell EVs Online as a Pure EV Company by 2030; Ford – EVs Present Environmental, Human Rights Issues; EVs – Ford to Spend $11.4B Creating a Tennessee Campus, Twin Battery Plants in Kentucky)